Empowerment financing dropped 19.5% in 2019, according to a new report on transformation in the banking sector.
It is accused of swindling Ndaba Ekude, of the profit generated by the partners' joint venture, Marula Staffing.
Ndaba Ekude alleges that at least R264.9-million in turnover was not declared between 2005 and 2012; that Kelly charged Marula Staffing R54.4-million in unauthorised "group charges" in that period; and a further R136.7-million was charged in payment of loans obtained from banks when the loans were much lower.
Ndaba Ekude also claims that R59.9-million was transferred from the Marula Staffing account to the South African Post Office, which was Marula Staffing's client, without any explanation.
Marula Staffing was established jointly by Kelly and Ndaba Ekude mainly to secure a tender for the post office to recruit and place temporary and permanent personnel.
The BEE partner owns 51% of Marula Staffing and Kelly holds 49%, but Ndaba Ekude claims that Kelly denied it access to the joint venture's bank accounts, controlled the finances and decided how profits should be split.
Kelly and Ndaba Ekude have been at odds before over control of Marula Staffing's finances, but the latest battle was caused by Kelly's application in the South Gauteng High Court to wind down Marula Staffing because the reason for its existence (the post office contract) had been terminated; the company had not traded for about five months; Marula Staffing was insolvent and unable to pay its debts; and it owed Kelly just over R1-million that it could not pay.
"Misappropriation" of funds
Ndaba Ekude, in turn, accuses Kelly of misappropriating Marula Staffing's company funds, therefore forcing Marula into a "deliberate insolvency", according to a source close to the matter.
In court papers opposing Kelly's application to have Marula Staffing dissolved, Ndaba Ekude's director, Themba Mahlangu, who is also managing director of Marula Staffing, describes Kelly's application as "fatally defective".
Ndaba Ekude wants Kelly's application to liquidate Marula dismissed and an independent administrator appointed to investigate Marula's financial affairs.
Kelly's group chief executive, Gareth Tindall, said the company had been advised by its legal team not to respond to questions posed by the M&G. "Not only do the questions raised by you go to the very root of the ongoing opposed high court application, we are not at liberty to answer the questions posed by you as we are prohibited from doing so by the confidentiality provisions in the shareholders agreement," he said.
Ndaba Ekude charges in court documents that Kelly "arbitrarily misappropriated Marula Staffing's funds; is extensively mismanaging Marula Staffing; is extensively mismanaging Marula Staffing's bank account; and monies to which Marula Staffing is entitled" and that "the manner in which Kelly's directors have conducted the business of Marula Staffing is oppressive".
Ndaba Ekude directors Mahlangu and Immar Dzingwa claim they were made signatories to Marula Staffing's bank account only in 2008 after the forensic auditor the BEE partner appointed questioned Kelly about BEE fronting. Even then, Ndaba Ekude claims, "our only right was to access statements, not to authorise payments".
Bank records
Ndaba Ekude was able to obtain bank records for the Marula Staffing account only in November 2012 and the company's allegations of misappropriation of funds stem from what it calls "major discrepancies between turnover and deposits in the bank".
Bank records reveal that, between 2005 and 2012, "large sums of monies were taken from the bank account by Kelly without the knowledge or authority of the board of directors of Marula Staffing", said Mahlangu in court papers. Ndaba Ekude also alleges that Kelly robbed Marula Staffing of the proceeds of the KwaZulu-Natal postoffice account with an estimated value of R12-million a year over a period of 10 years.
Mahlangu argues in the affidavit that the agreement the joint venture signed with the post office included the provision of services to KwaZulu-Natal, but that Kelly later claimed it had a separate agreement with another entity called Phumelela since 2000. Affidavits from two former Kelly employees tell a different story.
Because of the dispute around Marula Staffing's finances Ndaba Ekude has refused to sign annual financial statements since 2006.
Mahlangu's affidavit accuses Kelly of approaching the court for liquidation of Marula because it wants to bypass the shareholders' agreement that obligates parties to lend money to the company to pay its debts in the event of it not having sufficient funds to do so and further obligates Ndaba Ekude to sell its shares upon notice to Kelly.
Kelly has until May 31 to file its response.